XLE ETF

The XLE ETF, dominated by Exxon and Chevron, has decoupled from WTI crude oil prices over the past 18 months, suggesting a potential profit-taking opportunity. At current oil prices, the P/E ratio may rise to over 20x over the next 12 months, which would be expensive for a sector that is barely growing. Investors are likely to be better off buying oil futures rather than the XLE, as the current ratio implies negative excess returns over the coming years.

The oil and gas sector has averaged a -1.5% return in recent rate-cutting cycles, underperforming other cyclical and defensive sectors. XLE trades above its 3-year historical average in both P/E and EV/EBITDA, implying a 17% downside to fair value. Despite potential risks, historical data and current valuation support selling XLE, with a fair value estimate of $75.

Designed to provide broad exposure to the Energy - Broad segment of the equity market, the Energy Select Sector SPDR ETF (XLE) is a passively managed exchange traded fund launched on 12/16/1998.

Jason Snipe, founder and CIO at Odyssey Capital Advisors, joins CNBC's “Halftime Report” to explain why he's getting out of Energy.

Midstream and Energy have both been on a strong run in recent years. We compare the sectors in light of current macro factors. We then take a look at representative ETFs (XLE and AMLP) and share which is worth buying today.

Oil heads for its first weekly gain in a month buoyed by Hurricane Francine but fails to spur energy ETFs.

Among the hardest hit were Diamondback Energy, APA Corporation, and ExxonMobil. with shares of each falling around 4% on Tuesday.

The energy sector and the Energy Select Sector SPDR® Fund ETF in particular have underperformed the market over the past year. Investors should be mindful of XLE's extreme concentration into just two Oil & Gas companies and all the pros and cons associated with that. Improving business fundamentals within the Oil & Gas sector are likely to result in the XLE closing the performance gap with other sector ETFs.

Second level thinking is crucial for superior investment performance, requiring insights beyond what the market has already priced in. The AI boom and European energy shifts highlight the potential in the US energy sector, particularly natural gas. The Energy Select Sector SPDR Fund offers diversified exposure to the energy sector with a strong financial stability profile.